Competing for Talent: Large Firms and Startup Growth
Abstract:
This paper explores the impact of large firms’ hiring in local labor markets on the salaries offered by startups and on startup growth and performance. We analyze firm data matched to help-wanted ads and find strong evidence of “crowding out.” A standard deviation increase in the share of ads posted by large firms raises startup pay offers by 5-10% for critical managerial, STEM, and sales jobs, and it reduces expected startup growth by 36%. Crowding is diminished by employee mobility and by spillovers to startups in closely related businesses. It is increased by big firm markups, which may have a large effect on startups. Results are robust to a shift-share instrumental variable strategy. Crowding has important implications for firm strategy, regional policy, and for understanding the slowdown in the aggregate growth of startup firms.
About Felix Poege:
Felix Poege is an Assistant Professor at Bocconi University’s Management and Technology Department. His research focuses on the innovation strategy of firms under competition. With this, he studies topics in strategic management and the economics of innovation, interlinked with topics in industrial organization, science, and human capital. Prior to joining Bocconi University, he earned a doctorate in Economics at LMU Munich and the Max Planck Institute for Innovation and Competition and was a Postdoctoral Associate at Boston University. For more information, see: https://www.felixpoege.eu/
Language: English
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